CH140320 - Interest: breathing space

You must check whether, and from which date, the FA 2009 interest rules apply to the tax or duty you are dealing with. See CH140160 for full details.

Regulations made by HM Treasury came into force on 4 May 2021 and provide a Debt Respite Scheme to give individuals in debt the right to legal protection from creditor action while they receive debt advice.

Under the scheme eligible individuals have access to a moratorium period (often referred to as breathing space) during which interest, fees and charges are frozen and enforcement action is paused.

Late Payment Interest is calculated to exclude any amount which accrued during the Breathing Space period

More information on Breathing Space can be found here

A dedicated team within Debt Management are responsible for handling cases in HMRC, including setting flags on systems to indicate a breathing space period.

In HMRC Breathing Space will cover eligible business debts incurred by individuals who are not VAT registered at the time of entering Breathing Space including interest and late payment penalties.

To be an eligible debt, it has to have been owed, and included in the application, at the time of the application for Breathing Space

Note: For VAT to be eligible for Breathing Space protections, an existing VAT debt must relate to a customer who is a sole trader and has deregistered from VAT.